(Bloomberg) — Stocks and bonds retreated as traders pause after November’s blockbuster rally and debate the case for interest rate cuts. Bitcoin surged past $41,000, while gold briefly touched an all time high.
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The 10-year Treasury yield added five basis points to 4.25% while US futures posted modest losses.
A slew of economic reports this week are expected to shed light on the state of the US labor market and whether markets are prematurely excited that softer economic conditions can open the door to Federal Reserve rate cuts. Soft-landing hopes built on an economy at “stall speed” look fragile, leaving the market open to risks of a deeper contraction, JPMorgan Chase & Co. strategists led by Mislav Matejka warned in a note.
“Rates seem to price more the positive news than not,” Mauro Valle, head of fixed income at Generali Investments Partners, wrote in a note. “It’s unlikely to see another movement for lower yields in the final weeks of the year.”
The benchmark S&P 500 advanced about 9% last month — one of its best November rallies in a century — on optimism around a peak in interest rates. That has left the index in overbought territory — a technical level that is generally considered to be precursor to a selloff.
Fed Chair Jerome Powell on Friday pushed back against expectations of cuts in the first half of 2024. Swaps markets now see a more than 50% chance of a reduction in March and are fully pricing in a cut in May.
Those bets are set to be tested tomorrow, with the latest reading on US job openings (or JOLTS) for October. That report will be followed by ADP’s National Employment Report on Wednesday and non-farm payrolls on Friday.
“Still-robust demand and labor-market dynamics in the US” should keep traders wary that inflation can keep cooling, according to Barclays Plc strategists including Ben McLannahan. “Further falls in inflation will be more difficult from here,” they wrote in a report.
Among individuals stocks, Spotify Technology SA shares rose in premarket trading after the company said it will reduce headcount by about 17%, at least the third time this year the streaming service has cut jobs. Roche Holding AG gained after the Swiss drugmaker agreed to buy Carmot Therapeutics Inc. for as much as $3.1 billion in a deal that would give it access to experimental medicines in obesity and diabetes.
Meanwhile, gold surpassed $2,130 an ounce before giving up gains for the day. Bitcoin climbed past the $41,000 level to the highest since April 2022.
Key events this week:
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Riskbank November meeting minutes released, Monday
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US factory orders, durable goods, Monday
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Reserve Bank of Australia rate decision, Tuesday
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Japan’s Tokyo CPI, Tuesday
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China Caixin services PMI, Tuesday
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South Korea CPI, GDP, Tuesday
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Eurozone PMIs, Tuesday
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Australia GDP, Wednesday
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Eurozone retail sales, Wednesday
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Bank of Canada rate decision, Wednesday
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China trade, FX reserves, Thursday
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Eurozone GDP, Thursday
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Germany industrial production, Thursday
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US wholesale inventories, initial jobless claims, Thursday
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Japan household spending, GDP, Friday
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US non-farm payrolls, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.3% as of 5:40 a.m. New York time
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Nasdaq 100 futures fell 0.4%
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Futures on the Dow Jones Industrial Average fell 0.2%
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The Stoxx Europe 600 was little changed
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The MSCI World index was little changed
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro fell 0.2% to $1.0867
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The British pound fell 0.3% to $1.2669
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The Japanese yen rose 0.2% to 146.49 per dollar
Cryptocurrencies
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Bitcoin rose 5.4% to $41,890.5
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Ether rose 3.5% to $2,260.24
Bonds
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The yield on 10-year Treasuries advanced five basis points to 4.25%
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Germany’s 10-year yield was little changed at 2.37%
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Britain’s 10-year yield advanced three basis points to 4.17%
Commodities
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West Texas Intermediate crude fell 0.4% to $73.74 a barrel
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Spot gold fell 0.2% to $2,068.25 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Alex Nicholson, Michael Msika, Sagarika Jaisinghani and Tassia Sipahutar.
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